Study Guide to Man, Economy, and State with Power and Market

102 Study Guide to Man, Economy, and State with Power and Market
Notable Contributions
• To underscore the fallacy of referring to a general “rate
of profit,” Rothbard invents the concept of a general “rate
of loss” (p. 513). His point is that it is not normal or automatic
to earn profits on the market. The standard excess
of product prices over money expenditures on factors is
due to interest, not entrepreneurship.
• The “paradox of saving” is this: In order to accumulate
capital goods and produce a greater volume of output
goods, it is necessary to curtail present consumption. But
if retailers see a drop in the demand for their products,
why would they invest in greater production capabilities
for the future? Only with a capital theory (such as the
Austrian) that incorporates the role of time in production
can one resolve this apparent paradox. As Böhm-Bawerk
pointed out in response to a nineteenth-century proponent
of this Keynesian view, when people save they are not
“spending less on consumption,” but rather they are
spending less on present consumption in the hopes of
spending more on future consumption.
• Rothbard defines the progressing and retrogressing
economy in terms of total gross investment, while Mises
defined these in terms of per capita total investment. (See
footnote 16, p. 532.)